help create a corpus for crucial stages in the child’s life
Saving for the future of child is always the first priority for parents, but as we are moving towards a more competitive world parents need to be more realistic with their savings plan. The amount parents are saving today as per present scenario for their child will be insufficient after fifteen years. And all credit goes to the rate of inflation. Due to this, not only the education is getting more and more expensive but also seeing the child achieve his/her entrepreneurial goals have become a distant dream for many.
So that your child is not compelled to adjust and change his/her goals just because the funds available to him/her are insufficient, you need to buy child plan only after keeping the rate of Inflation in mind.
Let us see, how does this happen and what you can do to overcome the hurdle.
Mr. A wants his two years old child to do MBA when he will be 21 years old. Let us assume that the cost of MBA according to present scenario is Rs. 3 lakhs. However, this cost will not remain same after 20 years. Taking inflation into account, after 20 years it will come around Rs. 10 lakhs. Since, education cost is rising more than the general inflation, you should have child Policy which can accumulate more than Rs. 10 lakhs in period of 20 years.
Generally, nobody can tell what is going to be the rate of inflation after 10 years. So, it is not possible to calculate exact amount required by your child. But, it is possible to calculate at least the approximate value. If we assume inflation rate to increase every year maximum by 2%, you can easily calculate the approximate amount required by your child after 15 or 20 years.
The question that comes next is where you should invest your money. There are many options for that like real estate or equity market. However, if you want to accumulate your savings by protecting it as well as investing it, there is none other than child insurance.
There are many child insurance plans available in the market and they range from traditional to ULIP’s. But it is not necessary that every plan will work for you. First look for your preferences such as you need corpus amount for education or for new business setup or is it for a new house and after what time period your child will require a lump sum amount. Calculate this amount keeping the rate of inflation in mind so that the corpus amount is exact or somewhere near your requisite amount. Next thing to question yourself is would you require entire amount at one go or you require it in instalments and what would be the number of instalments.
If you have even rough idea of your preferences it will be easy to choose the type of policy. Of course, you will not find the policy which matches exactly with what you want but you can buy child plan which is somewhere near your future plans. Other than this, the next option can be online child insurance plan. The first benefit you can get from online plan is you can get it at lowest possible rate due to competition in market and next advantage is you have the privilege to customize it through Riders and convert it into the best child plan.